The government has raised excise duty on cigarette, alcoholic beverage, chewing tobacco and tobacco related products by 8-10 percent. However, the tax rate on a majority of other goods has remained unchanged, says the budget for fiscal year 2017-18.

In the government’s financial plan that Finance Minister Krishna Bahadur Mahara presented at the Legislature-Parliament on Monday, the government has increased the tax rates on only those goods that are hazardous to people’s health.

Manufacturers of alcoholic beverages with high alcohol content will have to pay an additional 10 percent excise duty. Based on the variants, manufacturers of the alcoholic beverage have been paying Rs100-1,000 per liter in excise duty. Bishnu Nepal, chief of the Revenue Management Division of the government, said the manufacturers now need to pay Rs110-1,100 in excise duty on alcoholic products.

“Manufacturers of cigarette and chewing tobacco will also have to pay additional 10 percent in excise duty,” Nepal said. According to him, additional 8 percent excise duty has been levied on beer and tobacco-related products.

The government has allocated Rs1,278 billion for the next fiscal year, almost Rs200 billion more than the budget for the current fiscal. The estimates are based on the projection that the government would generate Rs730 billion in revenue next fiscal year. The revenue collection target for this year stood at Rs565.9 billion.

The increased liabilities of the government were due to the obligation of managing funds for post-earthquake reconstruction, implementation of the federal system and achieving the targeted goals of the periodic plans, the annual budget states. However, with the Election Commission enforcing the code of conduct for the local elections, the government has been unable to review the tax rate by notable changes.

“Although the government had planned to review the tax rates and to reduce the number of tax-free goods along with forming a permanent mechanism to settle disputes related to tax, it did not materialise due to the election code,” the budget says.

Nepal said the government has focused more on reforming the taxation system, tax collection procedures and capacity-building of the authorities concerned than increasing the tax rate. According to him, the reform programmes, if implemented effectively, would help meet the revenue target.

The budget has come up with a number of reform measures to meet the revenue target in view of the expansionary budget. Control in revenue leakages and coordination among the governments at the local, provincial and central levels for effective mobilisation of revenue are among the measures. For the purpose, the government will be initiating the process to amend the Revenue Leakage Control Act and related working guidelines this year.

Identifying additional revenue generating sources and effective implementation of the existing tax rates will be the among the government’s priorities. The government has targeted to embrace various professionals working in multiple organisations in the tax bracket through effective implementation of public account number system. Professionals such as medical practitioners, engineers, lawyers, advisers, artists, players and teachers will fall under the category, according to the budget.

The government will also launch a special programme to incorporate the electronic payment system under taxation. The government has also planned to acquire e-gateway licence from the concerned agencies abroad to collect tax on international trade through the e-payment system. To regulate double taxation, the government will join hands with a number of countries with which Nepal has notable amount of transaction and investment partnership.

The compensation to civil servants and other payments made from the treasury will be done strictly through the banking system. The budget also talks about devising a legal framework to check the informal channeling of the funds that includes Hundi, electronic currency transfer and bitcoin. To simplify the tax payment system, the government has planned to implement electronic payment system through the banking channel for settlement of tax liabilities.

Infrastructure development and reforms in customs procedures are among the targeted plans of the government to meet the revenue collection target. For the purpose, the government will be enforcing the work plan of the fifth-phase customs reform, modernisation at the customs and the second five-year strategic plan for the Inland Revenue Department. To accomplish the task of customs duty collection, the government will be implementing a web-based system and ASYCUDA World mechanism for customs processing at all the customs points. Special programmes will be enforced to minimise smuggling and the ongoing practice of under-invoicing during customs clearing, states the budget.